GM’s $773M Environmental Cleanup Plan

(The Detroit News) - The estate of bankrupt General Motors Corp. has reached a deal with the U.S. government, 14 states and a tribal government clearing the way to clean 89 former auto sites.

After months of talks, the deal clears the way for old GM — now known as Motors Liquidation Corp. — to establish a $773 million trust to clean properties – including $641 million in cash and $120 million in property. The U.S. government will accept public comments on the deal for 30 days — as will some states — meaning it won’t likely get approved until early next year.

Under the deal, the U.S. will certify that the new owners have no liability for any environmental problems if discovered later – a move that will help speed the sale of these properties. And old GM has more flexibility to sell the properties than other owners – since government funding accounts for the bulk of the cleanup.

“Cleaning up these former GM sites will allow new companies a greater opportunity to invest in Michigan and create jobs,” Michigan Gov. Jennifer Granholm said.The bulk of the money in Michigan will go to clean sites in Flint and Ypsilanti. The former Buick City complex will get $33 million while the former Willow Run site will get $35.7 million. In total, about 50 sites in 13 cities in Michigan are getting funding for environmental cleanup.

At a 230-acre portion of Buick City – where a cleanup plan has been approved —demolition is under way on some unused buildings.

The United States and Motors Liquidation Corp. filed the 170-page deal in U.S. Bankruptcy Court this morning. The court — which is overseeing the liquidation of old GM’s assets — still must approve the agreement before it can take effect.

About two-thirds of the sites are known to be contaminated with hazardous waste.

“This is template-setting agreement for environmental remediation, and one that our team at Motors Liquidation Co., the federal and state governments, and numerous other stakeholders worked extremely hard to make a reality,” said Al Koch, CEO of Motors Liquidation Co. “This plan is designed so that this money will be spent where it will truly do the most good for all parties concerned, rather than siphoned away on unproductive infighting as in some situations of this sort in the past.”

Michigan sites will get $159 million — the most of any state — to clean nearly 50 sites.

The Treasury is funding the cleanup as part of the $85 billion auto bailout. The money comes out of the government’s GM bailout. The Treasury lent “old GM” $1.175 billion to wind down its operations.

The former GM is in talks to sell up to 17 properties by year’s end and it’s soliciting bids for GM’s former Moraine plant.

It is close to a deal to sell the former Pittsburgh Stamping plant in West Mifflin, Pa. to a St. Louis development firm. It has sold three plants to date – including selling GM back its Strasbourg Powertrain plant in France, its Wilmington, Del. Assembly plant to Fisker Automotive. Old GM also sold the Pontiac Centerpoint facility to create a new movie studio.

The $773 million trust will be divided as follows: $431 million will go directly to states to be used for cleaning up former GM properties. $68 million will be placed in a pooled account for environmental cleanup that may arise at any of the 89 properties transferred to the trust on account of unforeseen conditions. That’s dubbed the “cushion fund” to make sure other cleanup issues that arise can be taken care of.

Approximately $12 million will be credited to Old GM for approved cleanup activities at various properties.

$262 million for administrative costs. That includes property holding costs like property taxes and site security, along with demolition and professional fees.

“This settlement holds accountable those responsible for contaminating certain properties and ensures they help transform these communities by supporting the necessary cleanup,” said Gary G. Grindler, Acting Deputy Attorney General. “The agreement marks a new beginning by responsibly addressing hazardous waste contamination in impacted communities, and at the same time creates jobs to help clean up and return these sites to beneficial uses.”

The White House hailed the deal.

Jared Bernstein, a White House economic adviser, said the deal “provides a mechanism to break this cycle in communities across the country.”

The deal allows for communities to “be given a chance to see much quicker reuse and redevelopment than would otherwise be the case. And they’ll create some good jobs along the way.”

The White House called the trust unprecedented “in size, speed of settlement, and level of local involvement.”

Some properties have been sold, while some cost estimates have been reduced. When the deal was first announced in May, the plan proposed setting aside $836 million to clean the properties. The value of some of the properties being sold has been reduced – another factor in the lower tally.

General Motors Co. was formed in July 2009 by the sale of most of the former company’s assets in a government-sponsored transaction. The U.S. Treasury invested $50 billion in GM and acquired a 61 percent majority stake.

Elliott Laws, who previously served in the EPA as assistant administrator for solid waste and emergency response, will be named the trustee and will oversee the administration of the funds in the trust.

Laws will work closely with the local communities when selling or repurposing the properties. Laws must consider both the potential for the reuse to create jobs in the state and the views of the residents as he oversees the sale of the properties.

Labor Secretary Hilda Solis noted the trust’s impact on local community development.

“These funds will create much-needed jobs in the communities directly affected by the General Motors restructuring. This trust will create jobs not only through the direct hiring of cleanup personnel, but also by generating private investment through locally driven solutions that repurpose the sites toward new productive uses,” said Solis, who is co-chair of the White House Council on Auto Communities and Workers.

The Detroit News